With ever greater frequency, payment instruments are replacing cash as the medium of exchange in commercial and financial transactions. Additionally, an increasing percentage of transactions are taking place at a distance over computer networks such as the Internet. Since payment instruments are subject to theft and fraudulent use, it is possible for unauthorized persons to make use of a payment instrument before the authorized user or owner of the instrument can become aware that the payment instrument has been compromised.
One method known to reduce these risks is to require the use of a second verification method, such as a password in personal identification number (PIN) known only to the authorized user, with every transaction. This is inconvenient, however, as a user may need to remember numerous PINs for multiple payment instruments. It may also require payment systems to be redesigned.
Another method to bolster security is for the desired recipient of funds in a transaction to initiate a ‘test’ transaction using the payment instrument in question, for example, a de minimus deposit or debit of unpredictable amount. Only by contacting the financial or other institution associated with the payment instrument and authenticating one's identity can one learn the nature and amount of the test transaction, thus only an authorized user can learn the amount. Once the amount of the test transaction is ascertained, the authorized user can then submit the information back to the desired recipient which can determine that the submitted amount is the same as the amount of the test transaction. One drawback with this method is that an actual transfer of value may take place, or multiple transactions may be required. Moreover, this method may require financial institutions to perform systems integration, process changes, and retraining of customer service staff. Another drawback is that, in theory, the test transaction amount may be guessed or otherwise predicted.
It would be desirable to provide methods and systems for verifying the authority to use a payment instrument that does not suffer from the drawbacks of the methods discussed above.